With Federal reimbursement expected to tighten for hospital capital
equipment, many laboratory managers are feeling the pressure to
anticipate future needs so that their instrument purchases can be made
within the current payment structure.

Sound instrument selection is based upon in-depth technical review
and includes such factors as analytical methodology, speed, random
access capabilities, and interferences. From a financial perspective, a
different yet equally important review must be conducted.

For optimal allocation of scarce capital and maximal payback on
investment, the following must be accurately calculated: total
instrument lifetime operational cost, monthly or annual operating cost,
actual monthly or annual cost per reportable test result, and fixed and
variable costs.

Unfortunately for most laboratories, instrument vendors prepare
financial reports that are biased to favorably present their specific
product. They frequently omit critical data that would increase the
operating cost.

At our institution, it became necessary to replace a veteran
dry-slide analyzer with an instrument that can provide a 20-test panel
in a rapid and more cost-effective manner. To simplify and standardize
the financial costing-out process, a program was developed in Basic for
an IBM-compatible microcomputer.

This program, which we call "Instcost,' is menu-driven
and screen-interactive. Occupying 6K of random access memory, it can be
used with a single floppy disk or hard disk drive and an inexpensive
dot-matrix printer.

In addition, specific calibration data, such as frequency, number,
and cost of different calibrators, is entered if required. Seven-year
straight-line depreciation can also be calculated--by inputting initial
instrument cost, the instrument's useful life in years, and the
salvage value at the end of the instrument's useful life--as can
the yearly maintenance contract cost.

Figure I is a program excerpt showing the Basic code for the
calculations. All data can be checked and corrected (see Figure II)
prior to final costing-out calculations.

At the bottom of the screen are displayed the monthly grand total
for operation, the monthly cost per reportable patient result, and the
total lifetime operating cost of the instrument. A printout of these
data can be obtained through use of the <ALT><PrtSc*> key
combination.

The current version of Instcost determines annual service costs for
all but the initial year of operation (when the instrument would be
under warranty). The instrument's repeat-test rate can be factored
into total monthly patient, quality control, and calibration test
volumes.

This program has been used in conjunction with a DBase III
instrument database to narrow down instrument selection on the basis of
cost, throughput, interferences, and other factors, and subsequently to
perform a detailed costing-out. In this manner, we identified the most
cost-effective, random access profiling analyzer for our for-profit
reference laboratory operation. The program is now helping us evaluate
whether we want to acquire a state-of-the-art dry slide analyzer, and if
so, whether a purchase or a rental would be more advantageous.

Readers who wish more information about this program may write to
the author at the Mt. Sinai Medical Center, Department of Laboratories,
1 Mt. Sinai Drive, Cleveland, Ohio 44106.